Technologies v. Microsoft Corp..

783 F.Supp.2d 1097

HOLOMAXX TECHNOLOGIES, a Pennsylvania Corporation, Plaintiff,

v.MICROSOFT CORPORATION, a Delaware Corporation, and Return Path, Inc., a Delaware Corporation, Defendant.

Case No. CV–10–4924–JF.

United States District Court, N.D. California,San Jose Division.

March 11, 2011.

Erik Swen Syverson, Pick & Boydston, Los Angeles, CA, for Plaintiff.Gabriel M. Ramsey, Julio Cesar Avalos, Orrick Herrington & Sutcliffe LLP, Menlo Park, CA, for Defendant.

ORDER ¹ GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND IN PART

JEREMY FOGEL, District Judge.

Defendant Microsoft Corporation (“Microsoft”) moves to dismiss the complaint of Plaintiff Holomaxx Technologies (“Holomaxx”) pursuant to Fed. R. Civ. Pro. 12(b)(6) for failure to state a claim upon which relief may be granted. The complaint asserts the following claims: (1) violation of 18 U.S.C. §§ 2510, et seq. (“Wiretap Act”); (2) violation of 18 U.S.C. §§ 2701, et seq. (“Stored Communications Act”); (3) violation of 18 U.S.C. § 1030, et seq. (“Computer Fraud and Abuse Act”); (4) intentional interference with contract; (5) intentional interference with prospective business advantage; (6) violation of California Penal Code §§ 630, et seq. (“wiretapping/eavesdropping”); (7) violation of California Civil Code §§ 43, et seq. (Defamation); (8) false light; and (9) violation of California Business and Professions Code §§ 17200, et seq. (“UCL”). ² For the reasons discussed below, the motion will be granted, with leave to amend in part.

I. BACKGROUND

Holomaxx describes itself as an “ecommerce business development company” that provides a number of different services, including “contract[ing] with commercial clients to provide a fully-managed email marketing service ....” (Compl. ¶ 13). It sends millions of daily marketing emails on its clients' behalf. ( Id. at ¶ 14). It generates these e-mails from subscriber lists provided by its clients. The lists consist of individuals who either have elected voluntarily to receive such correspondence or who have “opted-in” by co-registration. ( Id. at ¶¶ 14–15). Typically, it is paid a “fixed amount per email sent” and receives no compensation for e-mails that are unsuccessfully delivered. ( Id.). Holomaxx asserts that it is a legitimate, CAN–SPAM Act compliant email service provider. ( Id. ¶¶ at 15–16). It alleges that it takes specific safeguards to ensure such compliance, including: (1) producing e-mails with clear and accurate transmission and header information; (2) including “opt out” mechanisms for users electing not to receive future communications; (3) registering its domains and IP addresses with all available feedback loops; (4) originating all e-mails from the same set of servers; and (5) monitoring the compilation techniques employed by its clients. ( Id. at ¶¶ 15–18). As a result of these safeguards, Holomaxx maintains a self-reported complaint rate of between 0.1% and 0.3%.³ ( Id. at ¶ 19).

Microsoft is a global technology company and a major Internet Service Provider (“ISP”). (Compl. ¶ 20). Microsoft provides free e-mail services to millions of Internet users. ( Id.). Like most companies that offer e-mail service, Microsoft employs various filtering technologies and procedures that identify and reject potentially harmful communications. (Mot. to Dismiss, 1:11–14; Comp. ¶¶ 20–23). Holomaxx claims that Microsoft relies upon several faulty methods to determine whether incoming mail is spam, including an automated spam filter (“SmartScreen”), a technique known as a “dynamic spam trap,” ⁴ and evaluations from “whitelisting” services such as those offered by Return Path, Inc. (Compl. ¶¶ 20–23). Holomaxx alleges that in practice these methods filter and block legitimate e-mail communications. Holomaxx also claims that Microsoft wrongfully has refused to offer a remedy for these errors. ( Id. at ¶¶ 20–24).

In or about November 2009, Microsoft allegedly began “intermittently blocking, rerouting, and ‘throttling’ (i.e. delaying) emails,” sent by Holomaxx from a block of IP addresses referred to as the “.78 addresses.” ( Id. at ¶ 31). Microsoft stopped delaying the e-mails for approximately one month after being threatened with legal action, only to begin blocking them again in June 2010. ( Id.). Microsoft continues to block the .78 addresses. ( Id.). In May 2010, Holomaxx obtained a different block of IP addresses referred to as the “.88 addresses” that became operative in June 2010. ( Id. at 32). In July 2010, Microsoft began blocking the .88 addresses as well. ( Id. at 33). Holomaxx received error messages stating that rejection of its e-mails “may be related to content with spam-like characteristics or IP/domain reputation problems.” ( Id. at 34). Microsoft also indicated that it may have blocked Holomaxx's e-mails “based on the recommendations of [its] SmartScreen filter.” ( Id.). Holomaxx alleges that Microsoft continues to interfere with its legitimate communications and that Microsoft's refusal to remedy the situation has caused loss of revenue and damage to Holomaxx's reputation and client relationships. ( Id. at 36).

Holomaxx also claims that Microsoft wrongfully accessed the computer on which Holomaxx's e-mails were stored, scanned the content of the e-mails, and obtained information therefrom without receiving consent from either Holomaxx or the intended recipients. ( Id. at ¶ 41). Microsoft allegedly used this wrongfully obtained information, together with a “reputation score” provided by Return Path, Inc., to determine that Holomaxx's e-mails were spam. ( Id.). Finally, Holomaxx alleges that Microsoft communicated or implied to Dragon Networks, Holomaxx's hosting IP data center, that it believed Holomaxx was sending spam. ( Id. at ¶¶ 44–46). It is unclear whether Microsoft initiated this communication with Dragon Networks, or whether the communication was made in response to an inquiry by Dragon Networks after Microsoft blocked all messages originating from the data center's IP addresses. ( Id.). As a result, Holomaxx claims that its reputation was and continues to be damaged, and that its profits and its contractual relationships have been affected adversely. ( Id. at 46). It seeks declaratory and injunctive relief; statutory, compensatory and punitive damages; and reasonable costs and attorneys' fees. (Compl. 42:7–50:22).

II. MOTION TO DISMISS

“Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Center, 521 F.3d 1097, 1104 (9th Cir.2008). For purposes of a motion to dismiss, “all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party.” Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337–338 (9th Cir.1996). However, “[w]hile a complaint attacked by Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal citations omitted). Leave to amend must be granted unless it is clear that the complaint's deficiencies cannot be cured by amendment. Lucas v. Department of Corrections, 66 F.3d 245, 248 (9th Cir.1995).

III. DISCUSSION

Microsoft argues that Claims Three, Four, Five, Six, and Nine, all of which are based on Microsoft's filtering activities, are subject to an affirmative defense pursuant to the Communications Decency Act of 1996 (“CDA”), 47 U.S.C. § 230. (Mot. to Dismiss, 1:25–2:4). Microsoft also contends that Claims One, Two, Seven, and Eight are insufficiently pled and fail to state a cognizable claim. ( Id. at 2:4–15). In opposition, Holomaxx argues that affirmative defenses are not properly considered on a motion to dismiss, (Pl.'s Opp., 3:20–4:3), and that in any case the CDA does not give Microsoft “blanket immunity” or otherwise provide protection for providers that filter legitimate “business content.” ( Id. at 4:3–9). Holomaxx also asserts that each of its remaining claims is pled adequately. ( Id. at 9:1–25:1).

A. Communications Decency Act (Claims Three Through Six)

A principal purpose of the CDA is to encourage ISP's to engage in effective self-regulation of certain content. The Ninth Circuit has recognized that § 230 of the statute is “designed at once ‘to promote the free exchange of information and ideas over the internet and to encourage voluntary monitoring for offensive and obscene material.’ ” Barnes v. Yahoo!, Inc., 570 F.3d 1096, 1099–1100 (9th Cir.2009) (quoting Carafano v. Metrosplash.com, Inc., 339 F.3d 1119, 1122 (9th Cir.2003)); see also Zeran v. America Online Inc., 129 F.3d 327, 330 (4th Cir.1997) (finding that an important purpose of the CDA is to “encourage service providers to self-regulate the dissemination of offensive materials over their services.”). Accordingly, § 230(c) provides protection for “good samaritan” blocking and screening of offensive material. Pursuant to § 230(c)(2):

No provider or user of an interactive computer service shall be held liable on account of—

(A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, or otherwise objectionable, whether or not such material is constitutionally protected; or

(B) any action taken to enable or make available to information content providers or others the technical means to restrict access to material described in paragraph (1)

42 U.S.C. § 230(c)(2)(A) & (B). An “interactive computer service” means “any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server ....” 42 U.S.C. § 230(...